Reddit aims to lure more brands with new ad product

Reddit is expanding the types of ads it offers marketers, hoping its latest product, cost-for-click ads, will woo a different sort of advertiser onto its platform.

Cost-for-click ads, more commonly known as "CPC," charge advertisers for each click that's made. They're widely regarded as lower-funnel and are a pillar of direct response marketers, who use CPC ads to make sales, or have consumers take a specific action.

Although CPC is new for Reddit, the ad format itself is old, and was first popularized shortly after Google launched search advertising in 1999.

"We know this isn't groundbreaking," Zubair Jandali, VP of brand partnerships at Reddit, says. "But for Reddit, it is big because it's bringing a new type of advertiser to our platform … There is a class of marketers for whom the cost model is important and for those marketers, who only buy CPC or lower-funnel, Reddit becomes a more appealing option for them."

Brands such as Wayfair and Hired have signed up for Reddit's CPC ad format. To them, Reddit serves as a place to diversify ad spend away from Google and Facebook. Hired, for example, is using Reddit CPC ads to capture more job applications.

"[It] helps us differentiate from some of the bigger players currently dominating the ad world," Chase Gladden, growth marketing manager at Hired, says. "While these players do have more reach, it does get to a point of diminishing returns."

Although it declined to share specifics, Reddit says its ad revenue has grown "5x" in the last three years, adding that its sales have more than doubled year-over year. Still, the fact that Reddit only recently began offering something as established as CPC ads underscores that it has catching up to do, especially as it battles for ad dollars earmarked for Google and Facebook.

"This is a point of inflection that helps get us to parity in the market and will change the way advertisers think about our capabilities," Reddit's Jandali says. "The characterization of a duopoly is what advertisers are concerned with and it is finally affecting their business."

Jandali adds that the rollout of CPC ads means Reddit can now offer four different campaign objectives—reach, video view, traffic and conversions—with a full suite of bid types, which include cost per thousand impressions, or CPM, cost per view and now, CPC. "There is a commitment, or expressed desire, in the industry to diversify and we are now seeing the financial commitments behind those expressed interests," he adds.